Canada: Government Liability For Unnecessary Product Recall

In the recent decision of Los Angeles Salad Co. v. Canadian Food Inspection Agency, 2013 BCCA 34, the British Columbia Court of Appeal addressed the issue of liability — or lack thereof — on the part of a Canadian government regulator for damages arising out of negligent performance of its duties where the performance of those duties led to a recall of the plaintiff's product.

The plaintiff, Los Angeles Salad Co., supplied carrots to Costco outlets in the United States and Canada. According to the statement of claim, in 2007, the Canadian Food Inspection Agency (CFIA), the Canadian government regulator empowered to enforce food safety legislation in Canada, received reports from four consumers of the carrots who had contracted shigellosis, a potentially fatal illness caused by consumption of food contaminated with shigella bacteria. The CFIA, assisted by the Public Health Agency of Canada and Health Canada, inspected the carrots. The inspection was allegedly conducted negligently, and the CFIA informed Los Angeles Salad, Costco, the U.S. Food and Drug Administration and the public that the carrots might be contaminated with shigella bacteria, and advised the public not to consume them. As a result of this information, Costco recalled the carrots from its retail stores in Canada, and Los Angeles Salad voluntarily recalled its carrots from retail stores in the United States. The recalled carrots were destroyed, along with carrots in inventory and "in the ground." It was ultimately determined that the carrots were in fact not contaminated with shigella bacteria and had not been the source of the shigellosis outbreak.

Los Angeles Salad sued the CFIA, alleging that the CFIA's negligence in identifying its products as the source of the shigellosis outbreak was the proximate cause of economic losses suffered as a result of the recall and destruction of its carrots. The CFIA brought an application to strike out the action on the basis that the CFIA owed no private law duty of care to the plaintiffs.

The trial-level British Columbia court agreed with the CFIA and dismissed the action. Los Angeles Salad appealed the decision to the British Columbia Court of Appeal. In a decision released January 29, 2013, the Court of Appeal upheld the trial-level ruling, finding that under Canadian law there exists no private law duty of care owed by the CFIA to food sellers and similarly placed entities, as if such a duty were to be recognized, it would put the CFIA and other government regulatory bodies in the untenable position of having to balance public interests — ensuring food and product safety in the Canadian marketplace — with the private interests of commercial actors, which could produce a chilling effect on the proper performance of governmental duties.

The Court agreed with the views of the judge at first instance that to recognize a duty of care on the part of the CFIA would expose regulators to potentially indeterminate liability, with claims capable of being advanced by retailers, wholesalers, suppliers, food processors, distributors, farmers, and employees of each of them. It also found that there was no generally recognized tort of "negligent inspection/investigation by a government entity" under Canadian law, and although it was possible for a regulator to be liable to a member of the public in certain circumstances, it would not arise in circumstances where the regulator was simply discharging his or her statutory responsibilities in the public interest, even if they otherwise acted negligently.

Lastly, the Court of Appeal noted that although their decision essentially meant that a food seller who suffered a loss as a result of the negligence of a government authority had no recourse, as a policy matter where the defendant is a public body, inferring a private duty of care resulting from discharge of statutory duties would be rare due to the constitutional role of those institutions and the overarching concern of potentially unlimited exposure of the government to private claims that would tax public resources and chill government intervention.

This decision is in keeping with the general trend in Canadian jurisprudence to the effect that government regulators owe no private legal duties to the public when discharging a statutory role. Although arising in relation to a food supplier, the principles set out in this case will likely continue to be applied by Canadian courts in the broader product liability context.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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